USDJPY - Potential Bearish move coming
On Monday, the exchange rate of the Japanese Yen against the US Dollar showed a positive trend, reflecting a more optimistic market sentiment.
Looking at the short-term picture, it's important to note that the current uptrend is getting close to a potential reversal point. If we see a break below the key level of 148.80, which was the low on October 30, it could indicate a shift in momentum toward the bearish side. This level represents the last major lower high in the short-term uptrend.
When we examine the 4-hour chart from Monday, it appears to resemble a bear flag pattern, suggesting the possibility of a downward breakout and a challenge to those recent lows.
On the daily chart, which provides a view of the medium-term trend, the pair is still in an uptrend, and we should continue to monitor the 148.80 level closely. If it holds, a recovery remains a plausible scenario.
In the grand scheme of things, it's important to remember the saying, "the trend is your friend." For USD/JPY, the short, medium, and long-term trends are all still bullish, indicating that the odds favour further upside in the future.
If the pair manages to break above the 151.93 level from October 2022, which marked a 32-year high, it would provide confirmation of the uptrend, and our next targets could be at round numbers like 153.00, 154.00, and 155.00, among others. However, at this moment, we believe this is unlikely to happen until we witness a significant drop or pullback, which could potentially begin this week.
The Japanese Yen (JPY) experienced a decline against most other currencies on Monday, in line with the overall positive market sentiment that favours riskier currencies over safe havens like the Yen. This short-term weakness aligns with the broader trend. Since 2021, the Japanese Yen, as measured by the FXCM Index against a basket of peer currencies, has depreciated by more than 33%.
The primary reason for this weakness was the Bank of Japan's policy of maintaining sub-zero interest rates, while many other central banks were raising rates to combat inflation. Global investors typically prefer to invest where they can get the highest risk-free returns, leading to a preference for other currencies at the expense of the Yen.
More recently, with signs that many central banks have reached or are approaching peak interest rates, the interest rate differentials that worked against the Yen may be narrowing. If the Bank of Japan continues to normalise its policy and other central banks stop raising rates or even begin to reduce them, we could see a potential recovery in the Yen. We'll keep an eye on how this develops!
Looking at the short-term picture, it's important to note that the current uptrend is getting close to a potential reversal point. If we see a break below the key level of 148.80, which was the low on October 30, it could indicate a shift in momentum toward the bearish side. This level represents the last major lower high in the short-term uptrend.
When we examine the 4-hour chart from Monday, it appears to resemble a bear flag pattern, suggesting the possibility of a downward breakout and a challenge to those recent lows.
On the daily chart, which provides a view of the medium-term trend, the pair is still in an uptrend, and we should continue to monitor the 148.80 level closely. If it holds, a recovery remains a plausible scenario.
In the grand scheme of things, it's important to remember the saying, "the trend is your friend." For USD/JPY, the short, medium, and long-term trends are all still bullish, indicating that the odds favour further upside in the future.
If the pair manages to break above the 151.93 level from October 2022, which marked a 32-year high, it would provide confirmation of the uptrend, and our next targets could be at round numbers like 153.00, 154.00, and 155.00, among others. However, at this moment, we believe this is unlikely to happen until we witness a significant drop or pullback, which could potentially begin this week.
The Japanese Yen (JPY) experienced a decline against most other currencies on Monday, in line with the overall positive market sentiment that favours riskier currencies over safe havens like the Yen. This short-term weakness aligns with the broader trend. Since 2021, the Japanese Yen, as measured by the FXCM Index against a basket of peer currencies, has depreciated by more than 33%.
The primary reason for this weakness was the Bank of Japan's policy of maintaining sub-zero interest rates, while many other central banks were raising rates to combat inflation. Global investors typically prefer to invest where they can get the highest risk-free returns, leading to a preference for other currencies at the expense of the Yen.
More recently, with signs that many central banks have reached or are approaching peak interest rates, the interest rate differentials that worked against the Yen may be narrowing. If the Bank of Japan continues to normalise its policy and other central banks stop raising rates or even begin to reduce them, we could see a potential recovery in the Yen. We'll keep an eye on how this develops!
